Question

Mercury Bag Company produces cases of grocery bags. The managers at Mercury are trying to develop budgets for the upcoming quarter. The following data have been gathered.

  

Projected sales in units		1,170	cases
Selling price per case	$	240
Inventory at the beginning of the quarter		150	cases
Target inventory at the end of the quarter		100	cases
Direct labor hours needed to produce one case		2	hours
Direct labor wages	$	10	per hour
Direct materials cost per case	$	8
Variable manufacturing overhead cost per case	$	6
Fixed overhead costs for the upcoming quarter	$	220,000

What are the budgeted sales in dollars?

What are the planned production amounts in cases?

Answer 1

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Answer:

Budgeted Sales in dollars	$        280,800
Budgeted production of cases	1120 Cases

Budgeted Total manufacturing Cost	$        258,080
Budgeted value of ending inventory	$    23,042.86

Sales forecast
Budgeted sales (in cases)	1170
Selling price per case	$                240
Budgeted sales (in dollars) = 1170 *240=	$        280,800
Production schedule
Budgeted sales (cases)	1170
Target ending inventory	100
Cases budgeted to be available for sale	1270
Less: Beginning inventory	150
Planned production(cases)	1120

Calculation of Variable Manufacturing Cost per unit
Variable Manufacturing Cost
Direct Material		$             8	Per Case
Direct Labor	=2 hours per case x $10 per hour	$          20	Per Case
Variable Overhead per unit		$             6	Per Case
Total Variable Cost per case		$          34	Per Case

Total Manufacturing cost budget
	Per Case		For 1120 Cases
Variable Manufacturing Cost
Direct Material	8	=1120*8	$               8,960
Direct Labor	20	=1120*20	$             22,400
Variable Overhead per unit	6	=1120*6	$               6,720
Total Variable Manufacturing Cost			$             38,080
Fixed manufacturing overhead			$           220,000
Total Manufacturing Cost of Finished Goods Manufactured			$           258,080

Value of ending inventory = 258080 * 100/1120

$    23,042.86

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